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Fusion invests in Rwanda’s largest quarry

The East African firm, which is investing its first blind pool vehicle, is looking to sponsor fast-growing businesses in the continent’s less trodden markets.

Fusion Capital has acquired a large minority holding in Rusororo Aggregate, the first commercial quarry in Rwanda. 

The firm has invested $2 million for a 46.5 percent stake in the company, which remains owned by its founders. It intends to develop the business by implementing a mechanisation program – which it says could boost its production capacity by as much as eight times – as well as improving the company's management and governance structures. 

Established in 2010, Rusoro is Rwanda’s sole large scale business specialising in stone crushing for commercial purposes. It owns three mining sites close to Kigali, which together are valued at Rwf27 billion (€36 million, $42 million). 

Fusion expects the business to post strong growth over the next few years, owing to the demand generated by Kigali’s ongoing modernisation plans. Rwanda’s construction sector grew 23 percent in 2011, a level the firm thinks will likely be sustained in the near future thanks to robust infrastructure development. “There is a true capacity issue, and the government of Rwanda is pushing for quality,” Kajuju Kageenu, Fusion's investment director in Rwanda, told Private Equity International

We worked with them before, so it's a management that's actually tested. We have a lot of confidence in their capabilities and track record.

Kajuju Kageenu

Another important factor, she said, was the existence of an experienced executive team — in markets where skilled management can be hard to come by. “We worked with them before, so it's a management that's actually tested. We have a lot of confidence in their capabilities and track record.”

The investment was made via Fusion’s maiden fund, which closed in 2011 on $150 million. Prior to raising the vehicle, which offers financing of between $500,000 and $5 million, Fusion invested in companies on a deal-by-deal basis. 

The firm was founded in 2006 by Phil Goodwin, formerly at Montagu Private Equity and 3i, and Luke Kinoti, who spent most of his career working on microfinance and SME lending within African institutions, with a view to help plug the financing gap among the region’s SMEs. The firm, which started off by providing credit to local companies, now invests all its capital in private equity transactions. 

It is heavily involved in real estate and construction — two of the many sectors well-positioned to capitalise on the emergence of Africa’s young and urban middle-class, delegates at PEI’s Africa Think Tank said earlier this week. The rise in disposable income among local consumers, they explained, is driving a demand for housing, transport services and infrastructure, thereby creating opportunities for investors. 

The conference's participants underlined the higher valuations reached by some recent African buyouts as a sign of stiffening competition — but the need for funding at the SME level created a wealth of opportunities at the smaller end of the market.